The writer is UK chancellor of the exchequer
Like the rest of Europe, the UK faces extraordinary challenges this winter. While our energy supplies are secure, we are not immune from rising prices. The country’s economic outlook has deteriorated as the cost of energy has risen following Vladimir Putin’s weaponisation of Russia’s immense gas supplies in his barbaric war on Ukraine.
In the face of these challenges, the new prime minister, Liz Truss, promised to be bold and to do things differently. She is doing just that.
She promised to take decisive action within her first days in office, and today the government she leads is delivering for the British people and our businesses. Our new Energy Price Guarantee will limit the amount suppliers can charge customers for units of gas and electricity — saving the average household at least £1,000 a year based on current energy prices. With immense volatility in gas markets, the savings for families could be worth even more next year.
Our six-month scheme for businesses, and organisations like charities and schools will protect them from soaring energy costs and provide them with the certainty they need to plan ahead, protect jobs and continue trading.
But we have to be honest with the British public that helping people through the winter will inevitably mean some fiscal loosening in the short term. There is no other option. Without urgent support, businesses would cease to trade, jobs would be lost and inflation would continue on an aggressively upward trajectory.
There is no question in my mind that this is the right thing to do in these exceptionally difficult times. This is an emergency situation and it requires an emergency response. Targeted support would be in no way sufficient to manage the situation now, or what is to come if Putin further restricts supplies to Europe. What is clear is that the price of inaction would have been far greater than the cost of this intervention.
As much as this government is committed to helping people now, we have an equal commitment to getting debt down over the medium term as we grow our economy.
We will never let debt spiral unsustainably. As chancellor, I will keep a keen focus on driving growth, and ensure every penny of public funds is spent wisely. The advantage of this scheme is that it delivers substantial benefits to our economy while also providing urgently needed relief to people and businesses right now.
It will reduce energy company failures, which directly lead to higher costs for consumers, and will protect business and support jobs. It will boost growth. It will protect family budgets and balance sheets. And it will give certainty to everyone by bringing down inflation by around 5 percentage points.
This will, in turn, reduce government spending on servicing our debt by approximately £10bn over the first six months of the policy. Our radical supply side reforms to boost energy security — which are central to this package — will also reduce the cost of wholesale energy over the next two years.
We are dramatically increasing supply through a new Energy Supply Taskforce which will negotiate long-term energy contracts with domestic and international gas suppliers to immediately bring down energy costs and make them more affordable for the Exchequer. We are negotiating with renewable producers to reduce the prices they charge.
And we will maximise all sources of domestic energy, including North Sea oil and gas production and speeding up the deployment of clean, affordable, homegrown energy technologies such as offshore wind and new nuclear.
The coming months will be difficult — there is no question. But it is by creating a strong and resilient economy that we raise living standards and reduce our debt, in a fiscally sustainable way.